The European Commission wants to enact regulations that end cryptocurrency anonymity and make transfers of cryptoassets more traceable by authorities. Proposed legislation would require companies that facilitate the transfer of cryptocurrencies, such as Bitcoin or Ethereum, to collect the details of both sender and recipient.
According to the Commission, the rules – which already apply to wire transfers – “will ensure full traceability of crypto-asset transfers, such as bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing.”
Notably, the new rules would ban anonymous cryptoasset wallets.
Treating crypto like conventional currencies
More directly relevant to most businesses and consumers, the move is in line with a general trend to create an effective regulatory framework for cryptocurrencies.
In fact, the rules arguably aim to normalise the way cryptocurrencies are regulated, treating them like any other asset.
As EU financial services commissioner Mairead McGuinness told the media, “we shouldn’t have different rules for the financial system. They should apply across digital currencies as well.”
Less cryptocurrency anonymity, more accountability
Of course, extending the ordinary financial rules to cryptocurrencies means applying equivalent regulations on taxation.
For instance, US tax authorities have warned that they will take a hard line against crypto-aided tax evasion.
Similarly, UK authorities clearly stated that any transaction made with Bitcoin or another cryptocurrency is subject to VAT.
However, that leaves the question of whether exchanging your legal tender for Bitcoin is itself subject to VAT. HMRC said there is no current VAT charged on such a transaction. However, they also indicate that the situation is likely to change as new legislation develops.
Anyone trading in cryptoassets should pay careful attention to regulations around cryptocurrency anonymity and tax liability. It’s important to consider national legislation and of coordinated international developments.
Stay VAT compliant, however you do business
If there’s one thing authorities seem to agree on, it’s that trading in cryptocurrencies doesn’t exempt you from VAT or capital gains taxes.
Vatglobal is carefully monitoring global crypto regulation. Our technology-driven VAT compliance solution makes it simple and efficient to meet your global VAT obligations, whether you do business in dollars, sterling, euros, baht, Bitcoin or Ethereum.